How Much GST are you Paying on Gold, Mobile Phones and Various Commodities?

GST on pencil sharpeners has been reduced from 18% to 12%. Whether or not you’re shopping for back-to-school supplies, this update from the 49th GST Council meeting should interest you. This signals India’s adaptive tax strategy of revisiting tax rates in tune with the changing needs of the population.

Another note from the 47th GST Council meeting, in 2022 is the revision on orthopedic aids for defects and disability. It was brought down from 12% to 5%, for the benefit of the differently-abled.

This suggests a drop in price, and this can be quite notable depending on the commodity. In fact, there were a few changes to the terms on gold, and the GST on mobile phones. Read on to know more. 

Impact of GST on Prices and Taxation

As a regular taxpayer, you might be interested to know how GST has impacted prices and the taxes you pay. It has definitely had an impact on the prices, and it has also brought about standardization. Here’s how.

●       Removes Cascading Tax Effect

Earlier, you had to pay multiple indirect taxes while buying a product or service. This led to you paying tax on something that had already been taxed. GST eliminates this problem by subsuming all these taxes into a single tax rate.

●       Uniformity in Price All Over India

Before GST, you ended up paying different prices for the same product, based on how state governments taxed it. Sometimes, you had to travel to the state which levied the least tax on that product, just to get a better rate. With GST, this practice ceased and you can now get the same product at a uniform price anywhere in the country.

●       Tax and Price Transparency

In the past, it was easy for sellers to dupe and overcharge you if you were ignorant of the many taxes levied on your purchase. The simple GST calculation makes it easier to spot discrepancies in your invoice.

●       Discourages Unorganised Sector Because of Automation

Sellers need to file their GST returns online, while also combating a general distrust of technology. Most GST-related processes are digital which discourages sellers from the unorganized sector from using it.

This leads to a price monopoly by the organized sector, which benefits from their elaborate IT setups.

●       Ultimate Tax Burden Falls on You

GST is a destination tax, which means that tax is applicable where the product or service is consumed, rather than where it is manufactured. This means that as the final consumer, the tax burden is borne by you.

How Does[2]  GST Affect Various Commodities?

Under the GST Act, goods are specifically taxed based on many socio-economic indicators. Here are some examples:

●       Items with 0% GST
Daily sustenance food items such as eggs, milk, curd, fresh vegetables, unbranded wheat flour, and more are exempt from GST.
Health services including doctors’ consultation and treatment without admittance to the hospital are also on this list.

●       Day-to-Day Items
Goods like sugar, tea, LPG, spices, footwear cheaper than ₹500, Indian sweets and more attract 5% GST. For slightly more processed goods like ghee, fruit juice, processed food, and clothes costing more than ₹1,000, the GST rate is 12%.

●       Impact of GST on Lifestyle Spends
Items such as almond milk, eating at AC restaurants, and staying in hotel rooms (tariff > ₹7501) are taxed at 18%. Also, chemically made items such as toothpaste, soap, sanitizers, and more attract 18% GST.

●       Impact of GST on Sin[3]  Items
A higher rate of GST is applied on items considered unhealthy. This is called the “sin tax” and the idea is to make it unaffordable to discourage you from consuming it. Cigarettes and aerated drinks are a few such items taxed at 28%.

●       Impact  of GST on Gold
You should prepare to pay 3% GST on gold, whether it is in coin, bar, or jewelry form. Gold generally accrues making charges of between 8% - 35%. An additional 5% GST is levied on these charges.

Add to this around 15% in import duties and cess, and gold purchases today are at least 0.75% more expensive than what they used to be, pre-GST. Note that you don’t have to pay any GST on gold while exchanging old jewelry for new ones at jewelry shops.

You may be interested to invest in gold to secure your future. However, now might not be a good time to buy physical gold, given the ongoing high prices.

●       Impact  of GST on Mobile Phones and Laptops
You need to pay 18% GST when buying a new laptop. This implies that laptops have become more expensive under the GST Act, as earlier laptops only attracted 15% VAT.

The GST on mobile phones is also 18%, regardless of whether you buy a new or second-hand device. You need to pay the same rate for accessories such as headphones, power banks, memory cards, and more.

However, there is no import duty on manufacturing parts such as camera lenses or lithium-ion cells. This is intended to encourage the local manufacture of mobile phones. The application of GST on mobile phones has increased its price. Finally, you can note that the effect of GST on mobile phone prices is marginal.

●       Impact of GST on Luxury Goods
Big-ticket luxury items such as cars, air conditioners, 32-inch (and larger) TVs, designer bags, and more such lavish purchases attract a GST of 28%. This is the highest slab of GST levied.

The idea of One Nation, One Tax was behind the implementation of GST in India. Overall, it allows a more streamlined approach to taxation. However, the rates of GST on gold, laptops, health insurance, banking services and more means that you pay higher prices on many commodities and services as compared to before.

To help you practice good financial discipline, take a few minutes before any purchase to understand the GST implications on its price.